Greek parliament votes in favour of austerity measures

British academic Dr William Mallinson on why he joined Greek demonstrations

Greece's parliament has approved the hefty cuts and reforms proposed by the government to address the country's financial crisis.

Members voted 172-121 to pass the bill, which includes tax rises and cuts in pensions and public sector bonuses.

Police used tear gas to disperse protesters who rallied outside.

On Wednesday, three bank workers died in a petrol bomb attack as demonstrations over the planned austerity measures turned violent.

AT THE SCENE

Duncan Kennedy, BBC News, Athens

It has been volatile and tense in front of the parliament building.

The situation turned a bit ugly with the police wading into the crowd and firing tear gas and loud stun grenades.

Some in the crowd responded by throwing missiles, but not the fire bombs we saw yesterday.

It's not the same scale as last night - protesters simply don't have the numbers or apparent organisation.

The deaths have shocked many in Greece. Bank workers have gone on strike in anger at the loss of their colleagues. Speaking in parliament ahead of the vote, Prime Minister George Papandreou said violence was "not a solution".

"The future of Greece is at stake," he said. "The economy, democracy and social cohesion are being put to the test."

He expelled three Socialist deputies from his parliamentary team for abstaining in the vote.

In New York, the Dow Jones industrial index plunged almost 1,000 points as investors succumbed to fears that Greece's debt problems would halt the global economic recovery.

'Avoid bankruptcy'

Greek Finance Minister George Papaconstantinou has warned Greece is two weeks away from defaulting on part of its debt; bonds worth 8.5bn euros ($12bn; £7.2bn) fall due on 19 May.

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Protesters keep up pressure outside parliament

"We have done what was necessary, not what was easy," Mr Papaconstantinou said after the vote. "Without these measures, we'd be thrown into the deepest recession this country has ever known."

He warned that the only way for the country to avoid bankruptcy was to take a 110bn euro bail-out from 15 European countries and the International Monetary Fund, contingent on the three-year austerity programme.

Those measures will mean a freeze on public sector pay until 2014, the average retirement age will rise by two years, and VAT will go up from 19% to 23%.

The aim is to achieve fresh budget cuts of 30bn euros over three years, with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%.

But Greece's conservative opposition leader has critised the austerity measures as being too harsh.

"The dose of the medicine you are administering is in danger of killing the patient," Antonis Samaras was quoted as saying by AFP news agency.

'Fair demands'

Minor skirmishes broke out in Athens following the vote, as police moved to disperse a few thousand demonstrators who had gathered outside parliament.

But the violence was quickly contained with riot police firing tear gas at the protesters, who had earlier thrown stones and bottles at them.

Wednesday's deaths - the first such fatalities in protests in nearly 20 years in Greece - have shocked many people in Greece.

The Marfin bank branch where the two women - one pregnant - and a man died has become the focus for grieving, with a steady stream of flowers being placed at the front door by people paying their respects, the BBC's Duncan Kennedy in Athens reports.

What went wrong in Greece?

Greece's economic reforms that led to it abandoning the drachma as its currency in favour of the euro in 2002 made it easier for the country to borrow money.

Greece went on a debt-funded spending spree, including high-profile projects such as the 2004 Athens Olympics, which went well over budget.

It was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.

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